Time to rescue BEE from victim mentality

IT WOULD be useful to get an accurate indication of the gross annual income and net worth of the top 500 black business people.

This would not only make for interesting reading but would also give us an idea of the potential economic influence of black people in the economy.

It could tell us where they choose to invest their money: black businesses or established, mainly white businesses.

This simple exercise has likely not been done and is unlikely to be. This omission gives some idea of what has always been the fundamental flaw of the current black economic empowerment (BEE) discussion.

It appears that, for most of us, BEE is premised only on the redistribution of existing wealth with very little idea, or no ideas, on how BEE can contribute to new economic growth.

The latest craze is to use “job creation” as a yardstick, but no new, sustainable jobs can ever be realised without new enterprise growth.

Except for denialists, it is now accepted that colonialism and later apartheid were economic impoverishment political schemes aimed solely at black people.

Not only did black people lose land and livestock, laws were enacted to ensure that whatever economic initiative black people had was frustrated. It is therefore necessary that we have laws that recognise the long-lasting nature of that legacy. In order for black people to gain a meaningful foothold in the economy, they need legislative, policy and financial instruments to redress that imbalance.

The most logical short-term intervention is redistribution to influence ownership patterns.

This, however, cannot be all BEE is about. While the legacy of colonialism will last for generations, the current approach will soon hit a brick wall.

We can redistribute only so many existing assets before we exhaust this opportunity. We should therefore also be occupied with producing innovative ideas to help us create new economic opportunities.

On its own, redistributive BEE will become increasingly difficult to justify. The assumption that any white person who starts an enterprise draws an advantage from apartheid cannot last forever. Two to three generations from now, it will be ridiculous to propose that a young, lowincome white entrepreneur who finds success in business needs to find black shareholders as a restorative justice measure, when black entrepreneurs would have been beneficiaries of assistance for generations. It will be silly to suggest race as a criteria for legitimising any business organisation.

Second, BEE charters and other similar instruments place only a subtle emphasis on greenfields growth significantly driven by successful black, gender-balanced enterprises. Our targets in this regard must be clear and measurable, with underlying hurdles identified and strategies developed to remove or lower them. We must also try to understand why, despite having immeasurably more resources than Pakistanis, Somalis and other expatriates, black local business people are failing to have a greater effect in sectors such as retail.

Every small town in the rural provinces is dominated by expatriate small retailers who have managed to displace locals.

What techniques are these communities using to find the success that has so far eluded black local businesses?

It is an indictment of our BEE intentions that Mqanduli in rural Eastern Cape has almost no local businessmen when the government has made billions of rand available to help small business.

It is an uncomfortable truth that black businesses have clearly not been successful with more resources (money, policies and laws) where expatriates are able to succeed without assistance.

Very few of us seem to understand to what extent the lack of social cohesion in the black community contributes to this lack of success. Various homogeneous communities in South Africa prosper because of the strong social, religious and cultural bonds that characterise them.

They invest in each others’ ideas, pool resources to lower their costs and use their social networks to procure from each other.

There is an opinion that black South Africans sometimes view one another with suspicion and compete even when it is unwise to do so.

There has not been any visible leadership to counter this destructive trend.

A journalist who spent some weeks with the Somali community related how, to his astonishment, he got an idea of how they have managed to sew up the township spaza-shop sector.

Not only do they establish informal cooperatives between spaza shops, they also use the same transport service providers to minimise their distribution costs.

This gives them a critical edge over local competitors, who have sometimes resorted to xenophobia to wrest back the initiative.

If Somalis have been able to gain as much traction as they have with nothing but the clothes on their backs, what possibilities exist with a little more cooperation between the higher net worth individuals?

For example, would it make any sense for the more successful black business people to invest in smaller black businesses, which would later benefit the sectors in which the bigger players are already involved?

It is correct that the government is now focusing its energies on identifying greenfields opportunities through which greater involvement by black enterprises can be pursued.

In this context, there appears to be no clear reason why the tourism sector in the Eastern Cape, with all its enormous potential, has not been the target of earnest government investment with incremental black participation. This can range from the construction of roads to key tourist locations, to water and sanitation infrastructure, to the development of new tourism routes and facilities such as hotels and golf estates with all the attendant sub contracting, retail and employment opportunities.

Finally we need to deal decisively with a culture among many young aspirant entrepreneurs that seeks immediate gratification and the comforts of major metropolitan areas, when there are opportunities in the backwaters of our own country.

Expatriates set up in “unfashionable” places such as Graaff-reinet, Lusikisiki, Matatiele and others. They drive creaking bakkies instead of the latest SUVS, get their hands dirty – and make lots of money. The typical local young entrepreneur subculture involves feeding expensive sartorial tastes and being seen in the right places with celebrities. Long-term success will not come from these habits.

Entrenching a culture of investment in organic business ideas strongly supported by the government, black enterprise and other financial institutions is what will deliver meaningful BEE and sustainable employment.

The current mode, where we collectively seem to wait until a white or foreign entrepreneur has developed an idea to implementation stage, and then complain that they are “not transformed”, is giving BEE a bad name.

There is an urgent need to rescue BEE from the victim mentality and replace it with organic forces for socioeconomic change that inculcate a new interpretation of what economic empowerment really means. There are many earnest black entrepreneurs ready to take up this challenge but for too long most funding has gone to redistribution instead, leaving them without capital.

In order to succeed at this, we have to be prepared to ask very uncomfortable questions and find answers that will help to found the economic utopia we dream of. Songezo Zibi is a communications specialist and a member of the Midrand Group. This article first appeared in Business Day